Diageo Plc on Monday said that it has reached an agreement with Vijay Mallya to acquire a 50% stake in his South African sorghum beer company, United National Breweries, for $36 million. The UK-based drinks major, which first evinced interest in a joint venture in November, said it expects to complete the deal in the first half of 2013 pending consent from the South African competition authority.
United National Breweries is a maker of traditional South African beer called ‘Umqomboti’, and Diageo has previously said it was considering the possibility of extending this joint venture to tap opportunities in emerging markets in Africa and Asia.
“Diageo today announces that it has entered into an agreement to acquire a 50% interest in the company which owns United National Breweries’ traditional sorghum beer business in South Africa. The remaining 50% will be held by a company affiliated to Dr Mallya,” said a release from the company.
Diageo had entered into a memorandum of understanding with Mallya on the South African joint venture in November, alongside its deal to acquire a majority stake in the UB Group’s flagship company in India, United Spirits (USL). The acquisition has been delayed beyond initial estimates as the R 5,441-crore open offer to acquire a 26% stake from the public shareholders of USL is awaiting clearance from Sebi and the Competition Commission of India (CCI).
The open offer application is under process, according to a January 18 update from Sebi, which had earlier sought clarifications from the offer manager twice. Diageo had received shareholder approval last month for a preferential allotment of shares in USL, which would take its holding in the company to 27.4% including the stake purchased from the promoters. The allotment triggers a mandatary open offer to the public shareholders.
Shares of USL have been trading at a premium to the offer price of R1,440 per share since the deal was announced on November 9. Shares of USL closed at R1,841.30, up 2.84% on the BSE on Monday.
Mallya's UB Group, which is hard-pressed for funds to save its floundering carrier, Kingfisher Airlines, is expected to net R2,400 crore from the USL stake sale.